"either an idiot... or possessed of a dangerous agenda and very cunning"

Thursday, 27 May 2010

The ownership metaphor

I read John Kay's new book recently. It's clearly a newspaper column strung out into a book, but as always some interesting thoughts in there, and well written. My general reaction was "meh" until he touched on my favourite topic. So below is a short excerpt that chimes with me

"Hume understood that the social contract was a metaphor, not an historical description of how government came about. Like all good metaphors and models it was instructive, but not factual. There was no social contract, but the concept of a social contract was emphasising that legitimate modern government rests on the broad consensus of the government.

And so it is with the closely analogous idea that the modern corporation is a contract between shareholders and managers. The model is a metaphor, not an historical description of how the corporation came into being. As with the social contract metaphor, the perception of the corporation as the creation of a contract among its shareholders recognises that a successful corporation depends upon the support of those who own its shares. But anyone who fails to recognise that this is a partial and incomplete description of the nature of the corporation understands little about business reality."

He also goes on to critique the idea that profit is the defining purpose of the corporation, will post that up later. Again I found this insightful, and this is an area where lefties often get themselves confused. I thought that book The Corporation that came out a few years back took a very literal view on this point for instance.

About Me

I work at the International Transport Workers Federation on capital stewardship. I'm interested in developing a stronger voice for labour in the capital markets, responsible investment and corporate governance.
This blog represents my personal views only.